On Thursday, President Donald Trump announced a $1.1 trillion budget proposal for GFY2018 which includes $639 billion for the Department of Defense (“DoD”). The budget request consists of $574 billion for DoD base budget programs and $65 billion for Overseas Contingency Operations (“OCO”).s (“OCO”).
To end the current continuing resolution (“CR”), which has put new-start defense procurements on hold, the United States House of Representatives voted 371-48 to pass a $578 billion defense bill for GFY2017. The spending bill includes $516.1 billion in the base budget and $61.8 billion in overseas contingency operations (“OCO”).
According to a White House official, President Trump’s upcoming budget proposal for GFY2018 will increase the defense budget by $54 billion to $603 billion, a ~10% increase over the spending levels set in the Budget Control Act. This proposed amount is a relatively modest ~$18 billion more than the amount former President Obama had proposed in his final budget.
After Retired Vice Admiral Bob Harward turned down President Trump’s offer to be National Security Advisor, the President selected Lieutenant General Herbert Raymond (“H.R.”) McMaster to replace Retired Lieutenant General Michael Flynn. Ret. Lt. General Flynn resigned amid reports he communicated with Russian officials and could be vulnerable to blackmail.
Two days before President Trump’s visit to Boeing’s South Carolina facility for the debut of Boeing’s 787-10 Dreamliner aircraft, 74% of the workers at the facility voted against unionization. Union organizers with the International Association of Machinists and Aerospace Workers were unsuccessful in their efforts to unionize the workforce. Workers in Boeing’s South Carolina facility currently earn ~1/3 less than unionized counterparts.
Navy and Marine F-18 availability has dropped from traditional in-service levels of ~70% to under 40% due to decades of reduced aircraft procurement and the limitation of aviation support services from the 2013 budget sequestration. Reduced procurement dates back to the end of the Cold War when the Navy bought fewer F-18s than originally expected and the Marine Corps didn’t buy any because of beliefs in decreased future military operations and anticipation for the new Joint Strike Fighter.
This past week, Defense Secretary James Mattis officially introduced his plan for rebuilding the U.S. Armed Forces to address President Trump’s national defense strategy. Mattis issued a memo to Pentagon budget planners announcing his desire to “build a larger, more capable, and more lethal joint force” and provided guidance for the FY2017 budget amendment, the FY2018 President’s Budget request, and the FY2019 – FY2023 Defense Program.
Boeing, Lockheed Martin, Northrop Grumman, and Raytheon all announced year-end earnings this week, with only Boeing receiving a positive market reaction from the earnings calls. Boeing beat forecasted quarterly earnings and raised guidance on its 2017 cash flow and profit compared to 2016, even as the company faces questions transitioning from the 777 to the 777X program.